or more of a market, a shared monopoly results. Collective or conspiratorial behavior, not competitive, then pervades productive activity. Such industries are many and recognizable; automobiles (General Motors, Ford, Chrysler); aluminum (Alcoa, Reynolds, Kaiser); soap detergents (Procter & Gamble, Colgate, and Lever Brothers); cereals (Kellogg, General Foods, General Mills, Quaker Oats); electric light bulbs (General Electric, Westinghouse, Sylvania); cigarettes (Reynolds, American, Philip Morris), and others.

The extent of shared monopolies can modestly be desired as staggering. In 1959 economists Carl Kaysen and Donald Turner concluded in their now classic Antitrust Policy that "there are more concentrated than unconcentrated industries in manufacturing and mining, they are larger in aggregate size, and they tend to occupy a more important position in the economy." More than a decade later, two other authors on Corporate America agreed. Economics professors William Shepherd and Richard Barber have both calculated that shared monopolies control about two-thirds of all industry. These are the industries of our giant firms: General Motors has 800,000 employees worldwide and collects more in total sales (some $20 billion annually) than the budgets of all but three countries; the advertising budget of Procter & Gamble alone is twenty times as large as the appropriation of the Justice Department's Antitrust Division, which must monitor a trillion dollar economy; the six largest firms in Fortune's 500 (there are 400,000 manufacturing firms in this country) earn fully twenty-five percent of all industrial profits.

Based on market concentration-the share of business held by the leading firms in a particular industry-there has been a slight increase in the already high level of concentration during the past two decades. But based on aggregate concentration the ownership of all manufacturing assets by our biggest corporations-the increase has been dramtic. While the top 200 industrial firms controlled forty-seven per cent of total assets in 1950, by 1965 they controlled fifty-five per cent. Willard Mueller, former chief economist of the Federal Trade Commission, testified before the Senate Antitrust and Monopoly Subcommittee in November, 1969:

"You may recall that I testified before this Committee in 1966 that, should postwar trends in aggregate concentration continue, by 1975 the 200 largest manufacturing corporations would control two-thirds of all manufacturing assets. Unhappily, we have reached this level ahead of schedule. Today the top 200 manufacturing corporations already control about two-thirds of all assets held by corporations engaged primarily in manufacturing." (Emphasis added.)

Also, the 100 largest corporations today have a greater share of manufacturing assets than did the 200 largest in 1950, the year Congress enacted the CellerKefauver Act to stop the trend toward industrial concentration. And our top 200 corporations now control the same share of assets held by the thousand largest in 1941, the year the landmark Temporary National Economic Committee submitted its final report to Congress recommending an "Investigation of Concentration of Economic Power." How can one comprehend power of this magnitude? Imagine a college classroom seating just 200, and there you could sit the rules of two-thirds of American industry and more than one-third of all the world's industrial production. Pharaohs and emperors would be envious.

The disfiguring of free enterprise by monopoly imposes serious economic and social tolls. Foremost is the overpricing that occurs when one or a few firms control a market. A staff report now at the Federal Trade Commission estimates that "if highly concentrated industries were deconcentrated to the point where the four largest firms control forty per cent or less of an industry's sales, prices would fall by twenty-five per cent or more." The examples are numerous:

There were a number of competing milk firms in Minneapolis-St. Paul in the mid-Sixties, but only three big milk firms in neighboring Duluth-Superior although costs were similar in both markets, the half-gallon wholesale price in 1967 was 33.8 cents in Minneapolis-St. Paul, forty-five cents in Duluth.

While there were once as many as eighty-eight competing auto manufacturers in 1921, today the "Big Three" produce eighty-three percent of all cars sold in the United States and ninety-seven percent of all domestic models. Industrial economist Leonard Weiss, of the University of Wisconsin, has estimated that the noncompetitive state of the auto industry costs $1.6 billion per year.

Federal Trade Commission studies have found that cereal prices are fifteen to twenty-five percent higher than would exist under competition because of domination of the industry by just four firms.

The oil import quota, by keeping out much foreign competition, permits domestic oil firms to overcharge, according to a Presidential task force, by an esti

mated $5 billion to $7 billion per year; for a family of four in New York, this means an average of $102 added to gasoline and home heating bills every year. Such overpricing leads to lost output. Monopoly misallocates resources, creating excess capacity and a smaller Gross National Product than is our national potential. Recent studies by economists William Shepherd and F. M. Scherer have tried to quantify this lost GNP, concluding that the overall cost of monopoly and shared monopoly in terms of lost production is somewhere between $48 billion and $60 billion anually. The tax revenues alone from this wealth could go a long way toward ending both poverty and pollution in this country.

Monopoly overcharging also results in an inequitable transfer cost. When consumers pay excessive prices for their purchases, monopoly profits then redistribute income from the consuming public to the shareholders of particular corporations. Professor Shepherd of the University of Michigan has estimated this redistribution of wealth at $23 billion annually. And "people's capitalism”— that "the people" own our corporations-is no rebuttal. Although millions own some stock, only a relative handful reap the lion's share of corporate dividends. A 1963 study, containing the most recent figures available, pointed out that 1.6 percent of the adult population of the United States owned 82.4 percent of all publicly held stock. This redistribution of wealth-exacerbating the wealth extremes of a society where the richest one percent of U.S. families receive more income than the bottom twenty percent and the top five percent more than the bottom forty percent-can eventually have serious political consequences. “A man who thinks that economics is only a matter for professors," writes author-economist Robert L. Heilbroner, "forgets that this is the science that has sent men to the barricades."

Lost output and income transfers are not the only ill effects of monopolies. Other dynamic costs are less capable of measurement but still severely damage our industrial and social health:

INFLATION AND UNEMPLOYMENT

Concentrated industries can largely shrug off the clasical monetary and fiscal restraints, not reducing their high prices as consumer demand declines. In 1970, both before and after the automobile strike, General Motors announced price increases attempting to maintain their targeted twenty per cent return (on net worth after taxes) rather than suffer a less than monopoly-like return. Due to such market power of big firms, we are in what economist Paul Samuelson calls a "sellers' inflation"-where higher costs are simply passed on to the consumer in the form of higher prices.

In 1969 the FTC's Bureau of Economics pointed out that "major concentrated industries, through the exercise of discretionary pricing power, contribute to both inflation and unemployment." Unemployment results since monopolies, as noted, significantly reduce our manufacturing output-which in turn reduces the number of workers who would otherwise be producing. If monopoly disruption were accountable for only twenty per cent of all the unemployed, this still translates into over a million unemployed workers. And to the extent that unemployment is an official policy to combat inflation-two million people have been thrown out of work between 1969 and 1971 with this purpose in mind—a “stagflation” created by our shared monopolies dims the employment picture.

POLITICAL AND SOCIAL EFFECTS

Assuming that Corporate America has political power, what then are the costs of increasing concentration of economic power? As economic diversity decreases, the number of units contributing to the political process decreases accordingly. And as political pluralism weakens, so does democracy. James Madison argued in the Federalist Papers that political freedom requires many "factions," setting faction against faction until a political equipoise results. But as large numbers of independent firms are swallowed up, we instead race toward America, Inc., in Mintz's and Cohen's phrase, "one gigantic industrial and financial complex functioning much like a separate government."

Socially, people are governed by distant operatives; initiative and individuality succomb to the ethic of the Organization Man. Job mobility declines as the number of important independent firms dwindles, "Free enterprise" then witnesses the kind of dependence found both in the cartelized Japanese economy and the communized Soviet economy. General Robert E. Wood, the ultraconservative former chairman of the board at Sears Roebuck, once observed, "We complain

about government and business, we stress the advantages of the free enterprise system, we complain about the totalitarian state, but in our individual organizations.. we have created more or less of a totalitarian system in industry, particularly in large industry."

Politically, the control over government by big business, already great, increases. "When a major corporation from a state wants to discuss something with its political representatives," Senator Hart has said, "you can be sure it will be heard. When that same company operates in thirty states, it will be heard by thirty times as many represenatives." Supporting this view was International Telephone and Telegraph's effort to drum up Congressional opposition to the Justice Department's attempt to block its merger with the American Broadcasting Company; 300 Representatives and Senators complained to Justice. Those large firms which dominate an industry, by their orchestrated power, can resist governmental and public pressure more easily than smaller firms of lesser political clout. And as big firms push out or buy out the small, the "mavericks" of industry disappear. Their disappearance reduces a source of political options since, as the number of private sources for social risk capital is reduced, the unpopular or new cause will find it that much more difficult to secure backing.

The social blights of racism and pollution have been associated with the discretionary power of monopolies freed from the spurs of competition. Economist William Shepherd studied racial patterns in white-collar jobs, concluding that firms with market power could afford the luxury of discriminating against blacks—and they did. But competitive firms, which had to hire the best employes at the going rate-whether they were black or white-were found to discriminate less. Also there is very little incentive for shared monopolists to be progressive on pollution, with their heavy investment in existing capital assets and with their ability already to exact monopoly-like returns. The Auto-Smog Conspiracy case provides one clear example. In this case the Justice Department charged the Big Four auto firms with illegally suppressing anti-exhaust technology and implementation.

Proponents of Big Business, on the other hand, argue that there are alternate benefits in our state of superconcentration. But on close examination, their verbal arrows become boomerangs :

INNOVATION

First popularized by the eminent Joseph Schumpeter, and recently adopted by John Kenneth Galbraith, the idea is that big firms can innovate better because they are able to risk the necessary large investments in research and development (R&D). "A benign providence," Galbraith has intoned, "has made the modern industry of a few large firms an almost perfect instrument for inducing technical change."

But nearly all objective evidence refutes this assertion. When you have a huge investment in present machinery, and when an unknown return is to be substituted for your sixteen to twenty per cent return, there is little need to embrace new technologies. Economist Leonard Weiss, after examining many analyses of R&D expenditures, concluded: "Most studies show that within their range of observation, size adds little to research intensity and may actually detract from it in some industries." Also, it should be stressed that about two-thirds of the research done in the United States is subsidized by the Federal Government anyway— not by big private industry.

A look at the concentrated steel industry revealed that of thirteen major inventions between 1940 and 1955, none was produced by the American steel companies. A small Austrian firm, one-third the size of one U.S. Steel plant, introduced the revolutionary oxygen steelmaking process. The first American company to adopt it was McLouth Steel, which had less than one per cent of industry capacity; it was ten years later when U.S. Steel and Bethlehem followed suit.

But steel has a long history of technological immobility. What of a large corporation commonly considered a major innovator, like General Electric, "where progress is our most important product"? In the household appliance field alone, the late T. K. Quinn, a former GE vice-president, credited small companies with the discovery and production of, among other items: the electric toaster, electric range, electric refrigerator, electric dryer, electric dishwasher, vacuum cleaner, clothes-washing machine, and deep freeze. Quinn concluded that "the record of the giants is one of moving in, buying out, and absorbing the smaller concerns." Nor was industrial bigness a sine qua non to the development of stainless steel

razor blades, transistor radios, photo copying machines, and the "quick" photograph. Wilkinson, Sony, Xerox, and Polaroid were all small or unknown when they introduced these products.

EFFICIENCIES

The reputed efficiencies of large scale operation become inefficiencies when the scale grows too large. Competition is the whip of efficiency, driving firms to produce better goods at lower costs in order to increase sales and profits. Monopoly and oligopoly, however, lead to "the quiet life" in Judge Learned Hand's phrase, a state of mind and economy where there is little pressure to seek out efficiencies. In an age which has witnessed the collapse of the Penn Central (a firm which was the result of a merger with claimed efficiencies because of its large size), and the near collapses of Ling-Temco-Voigt (LTV) and Lockheed aircraft firms. It should be evident that being big does not mean being efficient. Robert Townsend has put it more impressionistically: "Excellence and bigness are incompatible."

Huey Long once prophesied that fascism would come to the United States first in the form of anti-fascism. So too with socialism-corporate socialism. Under the banner of free enterprise, up to two-thirds of American manufacturing has been metamorphosed into a "closed enterprise system." Although businessmen spoke the language of competitive capitalism, each sought refuge for themselves; price-fixing, parallel pricing, mergers, excessive advertising, quotas, subsidies, and tax favoritism. While defenders of the American dream guarded against socialism from the left, it arrived unannounced from the right.

What can be done? There is the antitrust alternative-breaking up shared monopolies into firms of more competitive size. Treasury Secretary John Connally has already dismissed the role of antitrust in the Nixon Administration's Phase II. The new controls "would make [antitrust] less necessary and, very frankly, the matter has not been discussed at all," he said at a recent press conference. Others of this inclination charge "irrational populism" whenever corporate decentralization is urged, alleging it favors "Mom and Pop" stores over advancing technology. Clearly, only when the marketplace exploits actual efficiencies of size can the consumer get the most goods at the cheapest price. But the charge of irrational populism is misplaced when the point is that GM, averaging more than $20 billion in sales, could probably be split up into three to nine companies, or that I/TV, with eighty-seven subsidiaries, is neither efficient nor interested in the communities in which it invests. It is an argument for more $100 million firms and fewer $2 billion firms. It is an argument for the breakup and decentralization of many of our largest industrial corporations.

Beyond the "irrational populist" threshold, many others disagree with this suggested cure. One FTC commissioner, when asked what he thought of the Nader Antitrust Report, said. "Those guys are political dreamers. The Government will not break up the big firms." When asked why (since such lawsuits could be filed by his agency), he replied, "Because we wouldn't file such a suit." Catch 22.

John Kenneth Galbraith, in his The New Industrial State, ably points out the corporate control of the market mechanism, the seeking of growth not profits, the rise of oligopoly, and the blurring of private and public sectors. Despite this perception of symptoms, Galbraith goes on, mirabile diety, to diagnose this industrial patient as healthy-exploiting efficiencies, encouraging long-range planning, and creating stability. To be sure, it creates stability (as does pricefixing. Galbraith should be reminded), but stability for what, and for whom? As it has been already argued, certainly not for consumers, that ninety-nine percent noncorporate management sector for whom the economy, presumably, was constructed in the first place.

Even some of those who agree that laws and lawsuits against shared monopoly suits are economically valuable still get apprehensive at the prospect. There is first the fear of widespread disruption in American industry, to which economist and former antitrust chief Donald Turner has replied, "The disruptive effects are usually exaggerated anyway." Shareholders and employes would not be injured, since the divested businesses are not liquidated or given away, but are sold for market value and continue to operate under new ownership.

Second, for those concerned that deconcentration suits may be a harsh penalty for monopolistic firms. leaving monopoly uncorrected is a "harsh" treatment for consumers. A corporation is an artificial body created by the law which, in the interests of all, must be controlled by the law.

Third, some fear that monopoly moves might inhibit business growth by penalizing firms for their successes. But the chance that continued success may in the future result in an antitrust case should not slow down profit-minded corporations, which will still be tempted by the interim monopoly profits earned

prior to any dissolution suits. And finally, many understandably wonder if the public, comprised of large numbers dependent on giant business, would support such serious reform. This is the core issue. Without a following-demanding legislative action, supporting bigger budgets, and encouraging creative enforcement-antimonopoly activity will remain a romantic relic at best, a political pariah at worst.

Can a coalition coalesce around this issue? The ideological interests of small businessmen, small farmers, and urban liberals in a more competitive economic system are obvious. Racial minorities and blue-collar workers, seeing their small fixed incomes buy fewer goods because of monopoly prices, are also potential adherents. Even conservatives could jump on the antimonopoly bandwagon. They are the dedicated critics of public power, the believers in decentralization, and free enterprise, and something called "the competitive spirit." When confronted with the realities of unchecked, centralized private power, philosophic integrity could propel many into the antitrust camp. Conservative Senators James Buckley and Barry Goldwater, for example, opposed the Lockheed loan because it violated the principles of free enterprise. A top economic adviser to antitrust chief Richard McLaren, Leonard Weiss, aware of this conservative attraction and the potential popularity of an antimonopoly drive, argued for a breakup of General Motors with this flourish: "In terms of winning votes, a big automotive case might be worth a hundred merger cases. Conceivably, it would make Nixon into another Teddy Roosevelt."

Perhaps. More evident, however, is the evolution of the consumer movement into what some trend-watchers have called "the New Populism." Ranging from tax inequities to shoddy merchandise to unfair property taxes, from auto bumper frailty to Pentagon cost overruns, there is a common thread of growing citizen hostility to the invisible bilk, that involuntary taking of income by unaccounted institutions. The extent and cost of monopolies can become as central to the New Populism as it was to the old.

4. Column by Ralph Nader, "Break-Up of Giant Firms To Be a '72 Campaign Issue"

[From the Madison, Wis., Capital Times, Feb. 14, 1972]

BREAK-UP OF GIANT FIRMS TO BE A '72 CAMPAIGN ISSUE

(By Ralph Nader)

WASHINGTON.-Several Presidential candidates, including Muskie, Lindsay, McGovern and McCloskey, are about to take positions on the issues of concentrated power, secrecy and monopolistic practices of giant corporations. Injecting the matter of monopolies and giantism into an election campaign is something of a revival. Although virtually ignored for three decades, it draws on the historic aversion of many Americans to the "trusts" that erupted on the national political stage with the populist-progressive movement in the early years of his century. Why, in an era of skyrocketing campaign costs, would any politician believe that the reform of corporate power is a subject sufficiently compelling to risk both the withdrawal of business campaign contributions and the active opposition of industry?

The example of Sen. Harris, (D-Okla) who tried this theme last fall and went broke in his brief run for the Presidency, should tend to dissuade other hopefuls. Harris recalled the disgruntled words of a wealthy businessman supporter: "Fred," he said, "can't you stick to the dope traffic and safe subjects like that?" Harris and some other politicians-are convinced that the issue is important and that there is an emerging populist revival of concern about the power of the corporate state in America.

In the first place, such events as the bankruptcy of the Penn Central, the nation's biggest railroad, and the near collapse of Lockheed, the aerospace giant, have had a profound impact on liberal and conservative politicians alike. Both companies had to be rescued by government loans or guarantees, both reflected mismanagement and a secrecy that precluded early detection or public accountability; and one, Penn Central, was replete with managerial looting and serious breaches of responsibility to shareholders and passengers alike. The myth that connected bigness with efficiency and stability was severely shattered.

Furthermore, there is a movement spreading out of the farm belt made up of family farmers fighting for survival against the conglomerates which are